Saturday, May 23, 2009

May 22, 2009 – This column will discuss some of the major problems before us at the moment and offer some solutions.

1. The recession and the collapse of the automobile companies. The Great Depression of 1929-1939 began with a stock market crash, but it was made more serious by the auto companies inability to sell enough cars. Banks failed and people actually jumped through windows when they lost everything. In the United States at the bottom of the Great Depression 15 million people were unemployed and this was a time when the American population was less than half of its present total. It was also an era when fewer women were employed and the workforce totaled perhaps 60 million. This workforce was largely men. That is one-quarter of the men were out of job. There was perhaps 25% unemployment. None of this is as serious today. Banks have closed down, but their funds are backed by the government. The government itself is much stronger. There has been a housing bubble with people buying housing they could not afford or being laid off from their jobs and finding they could not meet their housing payments. But let us here deal with the auto companies. Today the government is saying the auto companies are too big to be allowed to fail. There are so many other companies connected to the auto industry that would also be taken down with them. We are seeing this in the closing of auto dealerships and the cutting back by auto parts companies. Now let us talk of a solution to this part of the problem. The government is going about this the wrong way. It is absurd to pump billions of dollars into the auto companies so they can continue to turn out cars that nobody is buying. Indeed, General Motors is going to close down for awhile while Chrysler is merging with Fiat. But a better solution would be to take these government billions and offer American citizens $5,000 for every American made new car they bought and did not sell again for over two years. That money might actually sell some cars and begin to get the auto industry moving again. That is not a fix to the housing bubble or the bank bust, but it would be a start. Other problems and at least partial solutions will be discussed on this blog a few times a week. Comments are welcome at SnakeOilsbcglobal.net